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Neiman Marcus Turns to More Discounting as Losses Widen

Although unsuccessful execution of promotional activities hurt Neiman Marcus Group Ltd.’s third quarter, the retailer is looking at 2019 as an investment year, including how it uses data to target personalized promotions to get closer to what its luxury consumers want.

In a Nutshell: Neiman Marcus chief executive officer Geoffroy van Raemdonck, said on a conference call Tuesday, that the luxury sector has “adopted a promotional approach” to its customers. And Neiman Marcus fell right in line. “We did react by increasing our competitiveness with promotional activities. Some were successful [and we are incorporating] learnings for promotional strategies going forward,” the CEO said.

There were also some executional miscues connected with how the company reacted to the slowdown in the fashion cycle for some of its top 50 brands. According to van Raemdonck, Neiman’s is actively managing its assortment, including adjusting its buys.

Looking ahead, the CEO said 2019 is an investment year for the company, which is focused on setting the foundation for the future. Much of that focus will be on customer data and how it can be used to drive Neiman’s business and help benefit its brand partners. Van Raemdonck said the company is using data in three areas: customer, so the retailer can better understand shopper preferences; category, using data insights to fill in gaps in the assortment; and brand, so Neiman’s can help its partners target new customers.

As for Hudson Yards, where Neiman Marcus’ New York City flagship store opened in March, the CEO described it as its “state of the art” store where it can provide intimate experiences for consumers. Even though the store is still very new, it’s already a top performing door for shoes and handbag sales.

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Twenty percent of the customers at the store are accessing paid services options in beauty, wellness and dining. Speaking to the “immersive experience” option in the demonstration kitchen area, Van Raemdonck said it’s “beyond traditional luxury product offerings.” That gives Neiman’s new ways to interact with its customers. Moreover, Van Raemdonck said Hudson Yards is a “testing ground for new experiences and services” and that the company will apply the learnings to its other stores.

Separately, Neiman got itself some breathing room through the time extension on the repayment of some of its debt agreements. The agreements with creditors extend loan maturities for certain debt obligations to 2023 and 2024, from 2020 and 2021. The company has long-term debt of nearly $5 billion, consisting of a term loan, some bonds and an asset-backed loan.

Net Sales: For the third quarter ended April 27, total revenues decreased by 9.3 percent to $1.06 billion from $1.17 billion. Included in the revenue tally was a 9.2 percent decline in net sales to $1.05 billion from $1.16 billion. The luxury retailer said comparable sales fell 1.5 percent in the quarter.

Online currently represents 31 percent of Neiman’s revenues and new online customer growth is at 7.8 percent.Van Raemdonck said he didn’t see any price increases–as he has in the past–from brand partners due to currency fluctuations, and there haven’t been any price decreases either.

As for promotions, competitors have, for a number of quarters, increased both the number of promotions and the duration of those promotions. Looking ahead, Van Raemdonck said Neiman’s is “prepared to compete,” but will take a “diligent and deliberate approach.” The retailer is preparing to be more proactive as in the past it hasn’t been reacting quickly enough. And given Neiman’s loyal customer base, Van Raemdonck said the company can differentiate itself by “targeting a promotion through personalized promotions.”

Earnings: Neiman’s widened its net loss to $31.2 million from $19.9 million in the year-ago quarter.

CEO’s Take: “We continue to drive innovation and are making long-term investments in technology and customer-centric capabilities that will both enrich the shopping experience and position the company for long-term growth,” Van Raemdonck said.